The claimant public company obtained an order against the defendant for payment for certain shares in the sum of €84 million with interest, and the defendant now appealed. The defendant had subscribed to shares in the claimant. The defendant was a subscriber to the claimant’s memorandum, which stated that subscribers agreed to become company members and take at least one share. Under section 584 of the Companies Act 2006 shares taken by a subscriber to a public company pursuant to an undertaking in its memorandum had to be paid up in cash. Under section 593, a public company could not allot shares otherwise than in cash unless the consideration for the allotment had been independently valued. That was subject to certain exceptions in section 594. The judge found, inter alia, that all parties had proceeded on a general assumption that there would be a share-for-share exchange and no cash paid for the defendant’s shares. He considered section 593 and the question whether the shares had been “allotted” within the meaning of the Act but he accepted the agreed position between the parties that they had been allotted. The judge further had regard to the exemption for share-for-share exchanges and concluded that the test in section 594 for such an “arrangement” had not been met. The defendant was ordered to pay for the shares, and the judge declined to exercise his discretion to grant relief under section 606. On appeal, the defendant contended, inter alia, that he had agreed to take “at least one share” and therefore had no civil liability for anything more than the cost of one share.
On the appeal —
Held, appeal dismissed. Section 593 of the Companies Act 2006 had no application because the subscriber shares were not allotted by the company within the meaning of that section. Section 584 contained an express requirement that shares taken by a subscriber in pursuance of his undertaking in the memorandum would be paid up in cash. On the true construction of the defendant’s undertaking in the memorandum and the terms of section 584 of the 2006 Act, the defendant had an obligation to the company to pay cash for the 840 million shares that he took on incorporation. Section 606 of the 2006 Act did not apply and the court had no power to relieve the defendant from his liability to the company pursuant to the undertaking which he had given in the memorandum. The decision of the judge would be affirmed but on different grounds (paras 55, 91, 94, 113, 121–122, 122, 123).
Robert-Jan Temmink QC and Tom Nixon (instructed by Teacher Stern LLP) for the defendant
Patrick Lawrence QC and Andrew Blake (instructed by Needle Partners Ltd) for the claimant.